Glaxo sees growth ahead after swinging to profit

StenStovall

LONDON -(MarketWatch)- GlaxoSmithKline PLC (GSK, GSK.LN) Tuesday said it expects to return to sales and margin growth this year despite missing earnings and sales forecasts for 2011's fourth quarter, and voiced confidence that its future will be driven by recent diversification, new products and expansion in emerging markets.

Chief Executive Andrew Witty said the company's main businesses are performing well despite challenges, including generic competition and continued pressure on prices in Europe. The revenue decline reflected continued falling sales of diabetes pill Avandia, anti-viral medicine Valtrex and pandemic flu vaccines.

"As we go into 2012, we are mindful of the potential pressures we face given the current global political and economic environment. However, we continue to expect to drive further shareholder returns as we seek to grow sales across our broadly based business and improve operational leverage and financial efficiency to deliver strong cash generation. We will also continue to invest appropriately in the business to generate sustainable and profitable sales growth, using strict returns criteria," Witty said in a statement.

The U.K.'s No. 1 drug maker, which last year bought back around GBP2.2 billion worth of its shares, said it is continuing the program and expects to buy back up to GBP2 billion of its shares in 2012.

Net profit in the three months to Dec. 31 was GBP1.25 billion, compared with a loss of GBP690 million a year earlier when the company incurred GBP2.17 billion in legal charges and restructuring costs of GBP283 million. Net profit excluding costs was GBP1.41 billion, missing forecasts of GBP1.45 billion.

Sales for the quarter fell 3% to GBP6.98 billion, missing analysts' forecasts of GBP7.38 billion for the final quarter.

Witty, who took the helm at Glaxo in 2008, has set out to diversify into areas such as consumer health care, emerging markets and biotechnology to reduce risk.

Glaxo has seen its share price rise some 20% over the past 12 months, reflecting its emergence from painful restructuring as a stronger and more diversified entity. The threat of generic erosion from drug patent expiries is largely now behind it.

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